ex10-40.htm


    
      

      

    

    Exhibit
10.40

     

     

    
      UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

       

      On August
31, 2008, the Company entered into a stock purchase agreement with Island
Environmental Services, Inc. of Pomona, California ("Island"), a privately held
company, pursuant to which the Company acquired all of the issued and
outstanding common stock of Island, a California-based provider of hazardous and
non-hazardous waste removal and remediation services to a variety of private and
public sector establishments. In consideration of the acquisition of the issued
and outstanding common stock of Island, the Company paid $2.25 million in cash
to the stockholders of Island and issued $1.25 million in three year promissory
notes.  Other consideration is payable based on the performance of the
acquired entity.  The Notes bear interest at 8%, payable quarterly,
and the entire principal is due 36 months after closing. As a result of the
agreement, Island became a wholly-owned subsidiary of the Company.

       

      The
acquisition of Island will be accounted for as a purchase in accordance with
SFAS No. 141, “Business Combinations,” and the operations of the company have
been consolidated with those of GEM as of August 31, 2008, the effective
date of the acquisition. The $3.5 million purchase price will be allocated as
follows based upon the fair value of the acquired assets, as determined by
management with the assistance of an independent valuation firm to determine the
components of the acquired business.

       

      
        	
                Current
      assets and liabilities

              	 
      	
                $

              	
                790,170

              	 
      
	
                Property
      and Equipment

              	 
      	 
      	
                2,709,830

              	 
      
	
                Total

              	 
      	
                $

              	
                3,500,000

              	 
      


      

       

      The
following unaudited pro forma combined balance sheet as of August 31, 2008 and
the combined statements of operations for the eight months ended August 31,
2008 and for the year ended December 31, 2007 give effect to the acquisition of
Island as if these transactions had been consummated on January 1,
2007.  The unaudited pro forma combined balance sheet as of August 31,
2008 gives effect to the Merger Transaction and acquisition of Island as if it
had occurred on August 31, 2008.

       

      The
unaudited condensed combined pro forma financial statements should be read in
conjunction with the historical financial statements.  The unaudited
pro forma financial statements are presented for illustrative purposes only and
are not necessarily indicative of future operating results or the results that
might have occurred if the exchange transaction had actually occurred on the
indicated date.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      General
Environmental Management, Inc.

      Unaudited
Pro Forma Consolidated Balance Sheet

      As
of August 31, 2008

      


      
        	 
      	 	
                Historical

              	 	 	
                Island

                Environmental

                Services,Inc.

              	 	 	
                
                

                 

                Pro Forma

                Adjustments

              	 	 	
                Pro
      Forma Consolidated

              	 
	 	 	 	 	 	 	 	 	 	 	 	(Unaudited)	 
	
                ASSETS

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                Current
      assets:

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                Cash

              	 	$	175,318	 	 	$	207,772	 	 	$	-	 	 	$	383,090	 
	
                Accounts
      receivable, net of allowance for doubtful accounts

              	 	 	5,806,562	 	 	 	1,064,478	 	 	 	-	 	 	 	6,871,040	 
	
                Prepaid
      expenses and current other assets

              	 	 	461,958	 	 	 	-	 	 	 	-	 	 	 	461,958	 
	
                Total
      current assets

              	 	 	6,443,838	 	 	 	1,272,250	 	 	 	-	 	 	 	7,716,088	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Property
      and equipment, net of accumulated depreciation

              	 	 	5,297,559	 	 	 	1,231,359	 	 	 	  1,478,471	(a)	 	 	8,007,389	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                OTHER
      ASSETS

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Restricted
      cash

              	 	 	1,197,234	 	 	 	-	 	 	 	-	 	 	 	1,197,234	 
	
                Intangibles,
      net

              	 	 	919,233	 	 	 	-	 	 	 	-	 	 	 	919,233	 
	
                Goodwill

              	 	 	946,119	 	 	 	-	 	 	 	-	 	 	 	946,119	 
	
                Deferred
      financing fees

              	 	 	168,882	 	 	 	-	 	 	 	-	 	 	 	168,882	 
	
                Deposits

              	 	 	365,889	 	 	 	-	 	 	 	-	 	 	 	365,889	 
	
                Total
      assets

              	 	$	15,338,754	 	 	$	2,503,609	 	 	$	1,478,471	 	 	$	19,320,834	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Liabilities
      and Stockholders’ Equity

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Current
      liabilities:

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Accounts
      Payable

              	 	$	3,115,186	 	 	 	400,215	 	 	 	-	 	 	 	3,515,401	 
	
                Payable
      to related party

              	 	 	57,272	 	 	 	-	 	 	 	-	 	 	 	57,272	 
	
                Deferred
      rent

              	 	 	40,850	 	 	 	-	 	 	 	-	 	 	 	40,850	 
	
                Accrued
      expenses

              	 	 	2,426,638	 	 	 	81,865	 	 	 	-	 	 	 	2,508,503	 
	
                Accrued
      disposal costs

              	 	 	611,131	 	 	 	-	 	 	 	-	 	 	 	611,131	 
	
                Current
      portion of financing agreement

              	 	 	2,565,486	 	 	 	-	 	 	 	-	 	 	 	2,565,486	 
	
                Current
      portion of long term obligations

              	 	 	4,935,092	 	 	 	-	 	 	 	-	 	 	 	4,935,092	 
	
                Total
      current liabilities

              	 	 	13,751,655	 	 	 	482,080	 	 	 	-	 	 	 	14,233,735	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                LONG
      – TERM LIABILITIES

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Financing
      agreement, net of current portion

              	 	 	979,970	 	 	 	-	 	 	 	-	 	 	 	979,970	 
	
                Long
      term obligations, net of current portion

              	 	 	1,342,080	 	 	 	-	 	 	 	3,500,000	(a)	 	 	4,842,080	 
	
                Convertible
      notes payable, net of current portion

              	 	 	501,722	 	 	 	-	 	 	 	-	 	 	 	501,722	 
	
                Total
      long-term liabilities

              	 	 	2,823,772	 	 	 	-	 	 	 	3,500,000	 	 	 	6,323,772	 
	
                Stockholders’
      equity (deficiency)

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Common
      stock, $.001 par value, 200,000,00 shares authorized 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                12,673,886
      and 35,439 shares issued and outstanding

              	 	 	12,674	 	 	 	35,439	 	 	 	(35,439	)	 	 	12,674	 
	
                Additional
      paid-in capital

              	 	 	51,021,049	 	 	 	 -	 	 	 	-	 	 	 	51,021,049	 
	
                Retained
      earnings (accumulated deficit)

              	 	 	(52,270,396	) 	 	 	1,986,090	 	 	 	(1,986,090	)	 	 	(52,270,396	) 
	
                Total
      stockholders’ equity

              	 	 	(1,236,673	)	 	 	2,021,529	 	 	 	(2,021,529	)	 	 	(1,236,673	)
	
                Total
      liabilities and stockholders’ equity (deficiency)

              	 	$	15,338,754	 	 	$	2,503,609	 	 	$	 1,478,471	 	 	$	19,320,834	 


      

       

      Descriptions of pro forma
elilminations:

       

      (a) To reflect acquisition
of Island Environmental Services, Inc. by General Environmental Management, Inc.
and allocation of purchase price.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      General
Environmental Management, Inc.

      Unaudited
Pro Forma Consolidated Statements of Operations

      For
the Eight Months Ended August 31, 2008

       

      
        	 
      	 	
                Historical

              	 	 	
                Island

                Environmental

                Services,Inc

              	 	 	
                Pro Forma

                Adjustments

              	 	 	
                Pro
      Forma Consolidated

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(Unaudited)	 
	
                Revenue

              	 	$	22,112,687	 	 	$	4,014,940	 	 	$	-	 	 	$	26,127,627	 
	
                Cost
      of revenue

              	 	 	17,826,413	 	 	 	2,356,037	 	 	 	197,128	(a)	 	 	20,379,578	 
	
                Gross
      profit

              	 	 	4,286,274	 	 	 	1,658,903	 	 	 	(197,128	)	 	 	5,748,049	 
	
                Operating
      expenses

              	 	 	5,018,761	 	 	 	2,413,922	 	 	 	-	 	 	 	7,432,683	 
	
                Operating  loss

              	 	 	(732,487	)	 	 	(755,019	)	 	 	(197,128	)	 	 	(1,684,634	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Other
      Income (Expense):

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Interest
      income

              	 	 	13,889	 	 	 	-	 	 	 	-	 	 	 	13,889	 
	
                Interest
      and financing costs

              	 	 	(2,199,966	)	 	 	(21,030	)	 	 	(186,664	)
      (b)	 	 	(2,407,660	)
	
                Other
      non- operating income

              	 	 	26,566	 	 	 	3,404	 	 	 	-	 	 	 	29,970	 
	
                Net
      loss

              	 	$	(2,891,998	)	 	$	(772,645	)	 	$	(383,792	)	 	$	(4,048,435	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Net
      loss per common share, basic and diluted

              	 	$	(.23	)	 	 	 	 	 	 	 	 	 	$	(.32	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted
      average shares of common stock outstanding,	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                basic
      and diluted

              	 	 	12,673,885	 	 	 	 	 	 	 	 	 	 	 	12,673,885	 


      

       

      Descriptions of pro forma
eliminations:

       

      (a) Depreciation expense
related to allocation of excess purchase price to assets acquired.

      (b) Pro forma interest
expense for debt incurred for acquisition if the debt had been outstanding from
the beginning of 2008.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      General
Environmental Management, Inc.

      Unaudited
Pro Forma Consolidated Statements of Operations

      For
the year ended December 31, 2007

       

      
        	 
      	 	
                Historical

              	 	 	
                Island

                Environmental

                Services,Inc

              	 	 	
                Pro Forma

                Adjustments

              	 	 	
                Pro
      Forma Consolidated

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(Unaudited)	 
	
                Revenue

              	 	$	30,445,608	 	 	$	7,697,167	 	 	$	-	 	 	$	38,142,775	 
	
                Cost
      of revenue

              	 	 	23,756,677	 	 	 	4,623,766	 	 	 	295,694	(a) 	 	 	28,676,137	 
	
                Gross
      profit

              	 	 	6,688,931	 	 	 	3,073,401	 	 	 	(295,694	)	 	 	9,466,638	 
	
                Operating
      expenses

              	 	 	13,617,277	 	 	 	3,591,588	 	 	 	-	 	 	 	17,208,865	 
	
                Operating
      loss

              	 	 	(6,928,346	)	 	 	(518,187	)	 	 	(295,694	)	 	 	(7,742,227	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Other
      Income (Expense):

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Interest
      income

              	 	 	39,667	 	 	 	57,606	 	 	 	-	 	 	 	97,273	 
	
                Interest
      and financing costs

              	 	 	(2,548,609	)	 	 	(34,214	)	 	 	(280,000	)(b) 	 	 	(2,862,823	)
	
                Loss
      on disposal of fixed assets

              	 	 	 	 	 	 	(8,003	)	 	 	-	 	 	 	(8,003	)
	
                Costs
      to induce conversion of related party debt

              	 	 	(6,797,639	)	 	 	-	 	 	 	-	 	 	 	(6,797,639	)
	
                Other
      non- operating income

              	 	 	148,890	 	 	 	20,134	 	 	 	-	 	 	 	169,024	 
	
                Net
      loss

              	 	$	(16,086,037	)	 	$	(482,664	)	 	$	(575,694	)	 	$	(17,144,395	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Net
      loss per common share, basic and diluted

              	 	$	(1.55	)	 	 	 	 	 	 	 	 	 	$	(1.65	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted
      average shares of common stock outstanding,	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                basic
      and diluted

              	 	 	10,360,712	 	 	 	 	 	 	 	 	 	 	$	10,360,712	 


      

      


      
        Descriptions of pro forma
eliminations:

         

        (a) Depreciation expense
related to allocation of excess purchase price to assets acquired.

        (b) Pro forma interest
expense for debt incurred for acquisition if the debt had been outstanding from
the beginning of 2007.

         

         

         

        4